You can still use ESA funds to pay elementary and secondary school costs

You can still use ESA funds to pay elementary and secondary school costs

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As the kids head back to school, it is a good time to think about Coverdell Education Savings Accounts (ESAs). One major advantage of ESAs over another popular education saving tool, the Section 529 plan, is that tax-free ESA distributions are not limited to college expenses; they also can fund elementary and secondary school costs. That means you can use ESA funds to pay for such qualified expenses as tutoring or private school tuition. This favorable treatment had been scheduled to expire after 2012, but Congress made it permanent earlier this year.

Here are some other key ESA benefits:

• Although contributions are not deductible, plan assets can grow tax-deferred.

• You remain in control of the account — even after the child is of legal age.

Source: PDI Global

• You can make rollovers to another qualifying family member.

Congress also made permanent the $2,000 per beneficiary annual ESA contribution limit, which had been scheduled to go down to $500 for 2013. However, contributions are further limited based on income. If you have questions about tax-advantaged ways to fund your child’s — or grandchild’s — education expenses, we would be pleased to answer them. information@keitercpa.com | 804.747.0000


The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


About the Author

Keiter CPAs is a certified public accounting firm serving the audittax, accounting and consulting needs of businesses and their owners located in Richmond and across Virginia. We focus on serving emerging growth businesses and companies in the financial servicesconstructionreal estatemanufacturingretail & distribution industries and nonprofits. We also provide business valuations and forensic accounting servicesfamily office services, and inbound international services.

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